Retail Real Estate Outlook for Q4 is Bright in the Northeast

Strong Demand in Commercial Retail Leasing, Vacancies Decline, Area Developers are Active Again

Moving into the final months of 2014, the outlook for retail in the Northeast is expected to continue on its positive course. At Levin, we are seeing demand from national, local and franchise companies across a broad range of categories. Vacancies are declining and rents are trending up for quality properties. Perhaps the most valid reason for optimism is that developers have again become active in our region, indicating a growing confidence in the future of the retail sector.

Retail Leasing is Up as Tenants Look for Quality and Location

Despite continued performance uncertainty for some retailers, leasing has picked up, particularly among tenants looking to establish or expand their footprints in the Northeast. Grocers, affordable fitness chains, off-price retailers and fast-casual restaurants are among the most active categories.

In turn, much of the “good” retail space has been absorbed already, and what remains available is commanding higher prices. At the same time, credit tenants remain focused on these better-quality, well-located assets, resulting in continued challenges for Class B properties and those in secondary locations. Retail real estate landlords are becoming more creative in their approach to leasing these properties, and are considering a wide variety of potential uses for their space. Watch for some retail real estate trends to emerge from this environment.

New Construction, Renovation and Expansion are Market Drivers

The increasing pipeline of new construction and the success of recently completed ground-up and renovation projects are bright spots in our regional retail real estate market. And while we will continue to see quality inventory added to meet growing demand, the maturity of the market, combined with lengthy approval and building processes, should keep the inventory of available properties in check. In other words, we do not anticipate oversupply anytime in the near future.

As such, we expect the market’s stability to increase gradually over the next couple of years. A continued low interest rate environment bodes well for the positive construction and investment activity we are seeing today. We will be keeping a close eye on that critical driver in the months ahead.